Fixed costs are ongoing business expenses that need to be paid on a regular basis, like monthly rent. These costs generally don’t fluctuate too much. Common fixed costs include:
Rent
Depending on your type of business, you may need office space. If you can run your business from your house in the first year or two, that’s excellent. Even still, if you think you may grow and need office space down the road, start planning and setting money aside as soon as possible. (Office space isn’t cheap.)
Need real estate? Typically, business spaces and storefronts carry a higher price tag and heftier taxes than residential areas. So do your homework as soon as possible and determine if and where you can afford real estate.
If you’re planning to have an office or retail space for your setup, you need to include rent as a fixed expense. This requires you to estimate how much space you can manage and the type of space your business will need. You can then calculate your rent expenses. If you choose to purchase instead of lease the business space, your mortgage will be your fixed expense.
Co-working spaceslike WeWork have become more common over the past few years. If you can’t afford high rent for office space, a co-working space can give you the space you need at a fraction of the cost. Providers like WeWork have national locations, but local co-working spaces are available too.
Some of the best sites to find co-working spaces include Coworker, WeWork, and LiquidSpace.
Payroll
An essential expense that any business model has to include is salaries for everyone involved in the business. This means establishing payrollfor youand any cofounders, partners, and employees. The first year of payroll is always challenging because you have to decide when to hire workers and when to contract a freelancer or provider. No matter which you decide, establishing payroll is essential.
To make payroll easier, payroll software like QuickBooks goes a long way in helping you plan out your costs.
Taxes
Thetaxes that apply to your businessdepend on revenue, deductible expenses, and your business’s location. If you’re using designated office space for your business, you might need to pay real estate taxes for the property as well.
It’s convenient to start your fiscal year as soon as you start your business. Overlapping the two will make it easy for you to calculate the amount of taxes you need to pay. It is wise to hire the services of a CPA to properly evaluate your business’s taxes, your income taxes, and returns for the fiscal year.
Legal and professional services
Certain businesses may require accountants, experts, or market research to ensure your plan is secure and legal. This is especially true if you’re selling a service. If you’re opening a simple little shop, you will still likely need a business plan, at least. This can set you back several hundred to several thousand dollars, depending on the extent of planning required.
A lawyer may also be a worthwhile investment. Their services include things like drafting various agreements, helping you choose a business structure, forming a separate business entity, or working through the incorporation process. Hiring an attorney to perform these types of services for you can save you a lot of time and money in the long run.
Not sure where to find an attorney? Here are some sites you can use to find legal representation:
Software
Most businesses use software to help run their day-to-day operations or provide services. For example,QuickBooksis a popular accounting tool used by business owners to track expenses, cash flow, and profitability. Other common software includescustomer relationship management (CRM) systems, Google Drive, Microsoft Office, website hosting, and hiring software.
Loan payments
If you’ve taken a small business loan to start your business, you’ll need to set aside a portion of your profits to make loan payments. Some businesses are eligible to get loans from theSmall Business Administration (SBA), which can offer competitive rates to make it easier to start a business.
The amount you need to reserve for repayment depends on the type of loan payback plan you have negotiated with your loan provider. In addition to the original sum payment, you will likely have to pay interest and should plan for its cost.
Insurance payments
Just like a car, businesses need to be insured.Business insuranceprotects you and your business from various lawsuits, damages, and more. In short, business insurance—much like car or health insurance—can save you from hefty legal fees and settlements in the event of an accident or lawsuit. Fun? No. Necessary? Absolutely.
Insurance costs vary depending on the plan you choose. They can include coverage like general liability insurance, workers’ compensation insurance, errors and omissions insurance, and commercial property insurance. The type of insurance you opt for depends on the nature of your business, the industry, the number of employees, and other risk factors.
Utilities
Utilities are one of the essential expenses that you will have to take care of when you establish your business. You’ll need to turn the lights on, right? These costs include gas, electricity, water, phone, and internet bills for your business space. Depending on where you live, you might need to pay for additional utility expenses like HVAC units.
Marketing costs
Marketingcosts for your business can be in the form of physical marketing materials, such as signs and banners. They can also cover digital marketing, such as ads on social media platforms like Facebook or LinkedIn.
Marketing costs can vary every month depending on the type of business you’re running. For example, if your business is remote, you likely won’t need to print flyers every month. Some marketing costs can be a one-time cost like designing your website or having business cards created.
Office supplies
Even the tiniest businesses will need some office supplies. A package of pens may only cost a few dollars, but over a year, reams of paper, staplers, pens, and office equipment can add up.
